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A study to gain an understanding of the challenges faced by SME's in obtaining finance.

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South Africa is seen as the economic powerhouse of Southern Africa and it is critical that strong economic growth is achieved on a sustainable basis to alleviate poverty and unemployment. Small and medium sized enterprises (SME‘s) have played a key role in achieving sustained economic growth in South Africa and their success going forward will assist with driving growth. This will ensure that employment is created and prosperity will increase in South Africa and the region. However SME‘s face hurdles to growth of which access to finance is a major constraint. This study aimed to unpack the different aspects of the financial obstacles that SME‘s face. The study was qualitative in nature and was approached from a supplier‘s perspective. This was achieved by targeting specialists at financial institutions who dealt with SME‘s financing needs. Data was collected by conducting one on one interview‘s with the specialists after which the data was analysed using NVivo, a computer data analysis programme. The study highlighted a number of challenges that SME‘s faced when applying for finance. The main challenges were poor financial management which lead to cash flow constraints and business failure, weak business management skills which undermined the quality of and understanding of business plans when applying for finance and a lack of collateral. The lack of quality education was also found to compound the challenges to gain financing for SME‘s. The opportunities leading from the study suggest that entrepreneurs have the potential to improve their chances of accessing finance by enrolling in entrepreneurial and business management studies, thereby learning to overcome poor financial management, and improve their business management skills. Additionally mentoring programs will be useful for training entrepreneurs in practical business management skills and collateral shortfalls may be overcome by accessing government led schemes offering assistance for collateral.


Master of Business Administration. University of KwaZulu-Natal, Westville 2015.


Small business--South Africa--Finance., Commercial loans--South Africa., Financial crises--Economic aspects--South Africa., New business enterprises--South Africa--Finance., Theses--Business administration., SMEs., Financial challenges., Small and medium enterprises.